‘While it is true that no one is above the law, it is equally true that so long as our Constitution lasts, everyone is above state terrorism’ - Palkhiwala, in ‘We, the Nation’
“Taxes should be collected,” said Chanakya, “like the honeybee which sucks honey from the flowers in a swift, smooth and painless operation.” The tax department seems to be unaware of this maxim. In March 2018, the Principal Chief Commissioner of Income Tax sent out thousands of letters warning the recipients of strict penalties and prosecutions if they failed to furnish the return of income before March 31, 2018. The letter itself contained details of TDS on interest. Super senior citizens receiving interest of ₹9,000 and TDS of ₹90 were also blessed with such letters.
A multinational firm was involved in a transfer pricing dispute. The I-T department raised a demand of over ₹22 crore. The Income Tax Appellate Tribunal granted interim stay subject to the company paying ₹2 crore. The Commissioner of Income tax approached the High Court with a writ petition challenging the stay order.
On merits, the case was covered by rulings of the Delhi and Karnataka High Courts. The appeal itself was coming up for hearing before the Tribunal shortly. Yet the Department chose to approach the High Court and sought adjournment of the main case before the Tribunal.
‘Wasting public time’
The Karnataka High Court criticised the unnecessary dogged approach to multiply litigation, wasting precious public time. “First raising unsustainable, illegal and high-pitched demands and then seeking to coercively recover the same showing scant regard to the orders passed by the highest Tribunal under the Act and then invoking the writ jurisdiction to support such effort is an utterly irresponsible and unfair behaviour.”
Expressing anguish while dismissing the writ petition of the department, the High Court chose to award exemplary costs. The Principal CIT and the Assistant Commissioner responsible for filing the writ petition were directed to pay ₹50,000 each from their personal resources, and not from government funds, within two months.
Sri Saibaba Sansthan Trust of Shirdi was asked to deposit ₹122 crore even when an appeal was pending. The case was covered in its favour by earlier rulings. Unable to bear the harassment, the Trust approached the Bombay High Court for stay. The High Court stayed the recovery of disputed taxes of the Trust observing that the aim of the entire exercise of the department appeared only to collect some taxes prior to March 31, 2018.
Inbavalli, aged 71, was a widow suffering from dementia. She was prosecuted for delay in filing her return and was sentenced to undergo six months RI. The Madras High Court ordered compounding of the case and quashed the sentence.
It is time the department took note of Chanakya’s exhortation.
(TCA Ramanujam is a former chief commissioner, Income Tax, and an advocate. TCA Sangeetha is an advocate.)
